Wednesday, February 21, 2007

Massive accounting fraud at Computer Associates...FACT

The point: this type of fraud doesn't occur without approval at the highest levels of a company. The story is at Yahoo News; here are a couple of excerpts.

"Sanjay Kumar, the former chief executive of CA Inc. (NYSE:CA - news), pleaded guilty on Monday to securities fraud, perjury and obstruction of justice charges related to his role a $2.2 billion accounting scheme at the computer software company."

"Kumar, who left Computer Associates International Inc., as it was known, in June 2004, improperly booked software license revenue from 1999 to 2000 in order to meet Wall Street analysts' quarterly earnings expectations and then lied to investigators about it, according to the indictment.

In one instance, prosecutors charged that Kumar paid off a customer who threatened to tell the government about a bogus software deal. The payoff of $3.7 million was made while Kumar knew an investigation was pending against the company."

"As part of the scheme, Kumar and other sales executives back-dated software license contracts so that revenue would be recorded in a quarter where extra sales were needed to help the Islandia, New York, based company to meet or exceed Wall Street estimates, the indictment said.

In one instance, Kumar flew in the company jet to Paris where he personally negotiated a license agreement for $32 million. That contract was backdated to make it appears that it had been finalized and signed on June 30, 1999, the government said."

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